March 28, 2016 Insurance Advocate by C Acunto

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Serving New York, New Jersey, Connec cut, Eastern Pennsylvania and Washington, DC

Don DeCarlo on Carpel Tunnel Syndrome… p14 Fishing Through Facebook… p26

PIA Market Trends Survey:

Vol. 127 No. 6 | March 28, 2016

Agents See Moderation in Rate and Underwriting Severity

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[ FOREWORD ]

STEVE ACUNTO

Societally Speaking… uWe are surrounded by it. Trending, polling and inference taken from it. If a poll says that x number of New Yorkers favor unlimited abortion rights, legal marijuana, assisted suicide and all the rest of the so-called Millenials’ agenda, it is treated as evidence and provides an assumed mandate to some legislators and some social engineers. We are beyond twitterings here. There is – thankfully – such an entity in New York as the New York Alliance Against Assisted Suicide – among many sane associations and societies aiming to preserve what’s left of civilized behavior and morals. The group opposes physicianassisted suicide. They are waging a PR battle in the state that brings their whollysane message to lawmakers and regulators. using a terminal brain cancer patient and representatives from the disability, aging, and hospice communities. Their arguments outline: • Risks of coercion and abuse of elderly and vulnerable populations • Discrimination against people with disabilities • Possibility of misdiagnoses • The role of depression and hopelessness • Fracturing of doctor-patient relationship • Suicide contagion • Absence of safeguards and lack of accountability • Need to promote "aid-in-living": hospice and palliative care As an industry, there is much that commends a commitment to preventing the legalization of assisted suicide in the state. And there’s the matter of permitting ultimate fighting or whatever exciting name is given to all-out fighting – versus boxing, judo or karate – for the blood lust of spectators. We are beyond entertainment here and we are well beyond sports. These social trends will change insuring dramatically over the decades ahead…and not for the best. … Congratulations are in order. Preferred Mutual Insurance Company based in New Berlin, NY has received a national Best Practice Company of the Year Award from the Independent 4 March 28, 2016 / INSURANCE ADVOCATE

Insurance Agents and Brokers of America (IIABA), “in recognition of its innovative efforts to support and disseminate the evolving best business practices of highly successful agencies.” Preferred Mutual will be presented with the award at IIABA's Legislative Conference on April 15, 2016 in Washington, D.C. According to IIABA, the Best Practices Award is being given to Preferred Mutual for "imaginative, outstanding and unique contributions in advocating Best Practice philosophies that enhance the independent agency system." Launched in January 2016, Preferred Mutual's New Agent Support Program aims to dedicate company resources to address a growing challenge faced by many agencies – the success and longevity of newly hired agents. Big “I” quotes Fred Schneider, Vice President of Sales and Distribution: "At Preferred, we have a proud tradition of using our resources to help our partners better serve their communities. Our New Agent Support Program further demonstrates that tradition and underscores our commitment to support the best practices of highly successful agents." Among those resources dedicated by Preferred is its newly created Mutual Marketing Center (MMC), which has been designed to support a joint agent/company prospecting effort. The MMC is an exclusive online portal providing Preferred's agent partners with the knowledge, social media and brand-building collateral they need to convey their expertise in auto, home and small business insurance. Preferred Mutual has 230,000 individual and business customers, 270 staff, more than 480 independent agents throughout New York, New Jersey, Massachusetts and New Hampshire, and has been in business since 1896. The company is rated "A" for excellent through A.M. Best. And now has some added bragging rights.[IA]

VOLUME 127, NUMBER 6 MARCH 28, 2016

EDITOR & PUBLISHER Steve Acunto 914-966-3180, x110 sa@cinn.com CONTRIBUTORS Peter H. Bickford Jamie Deapo Kelly Donahue-Piro Michael Loguercio Christopher Paradiso Lawrence N. Rogak N. Stephen Ruchman Jerome Trupin, CPCU Barry Zalma PRODUCTION & DESIGN ADVERTISING COORDINATOR Creative Director Gina Marie Balog 914-966-3180, x113 g@cinn.com COPYEDITOR & PROOFREADER Maria Vano mariavano9@gmail.com SUBSCRIPTIONS P.O. Box 9001, Mt. Vernon, NY 10552 914-966-3180, x111 circulation@cinn.com PUBLISHED BY CINN Media, Inc. P.O. Box 9001, Mt. Vernon, NY 10552 (914) 966-3180 | Fax: (914) 966-3264 www.cinn.com | info@cinn.com President and CEO Steve Acunto

CINN MEDIA, INC.

INSURANCE ADVOCATE® (ISSN 0020-4587) is published bi-monthly, 20 times a year, and once a month in July, August, September and December by CINN ESR, Inc., 131 Alta Avenue, Yonkers, NY 10705. Periodical postage paid at Yonkers, NY and additional mailing ofﬁces. POSTMASTER Send address changes to Insurance Advocate®, P.O. Box 9001, Mt. Vernon, NY 10552. Allow four weeks for completion of changes. SUBSCRIPTION RATES $59.00 US, Canada $65.00, International $110.00. TO ORDER Call 914-966-3180, fax 914-966-3264, write Insurance Advocate® PO Box 9001, Mt. Vernon, NY 10552 or visit www.Insurance-Advocate.com. INSURANCE ADVOCATE® is a registered trademark of CINN ESR, Inc. and is copyrighted 2016. All rights reserved. No part of this magazine may be reproduced in any form without consent. Trademark registered U.S. Patent and Trademark Ofﬁce.

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Contents [COVER STORY]

March 28, 2016 | Volume 127 Number 6

The Social Notebook: “The Talk of the Town” – You and Your Agency Chris Paradiso

In the Associations: The Grifﬁth Insurance Education Foundation Awards More Than $100,000 in Scholarships

On My Radar: The Reasons for Examinations Under Oath Barry Zalma

Courtside: No Fishing on Facebook, Holds Appellate Division Lawrence N. Rogak, Esq.

Looking Back: February, 1991

Classiﬁeds

PIA Market Trends Survey

[FEATURES] 4

Foreword: Societally Speaking Steve Acunto, Publisher

Exposures & Coverages: Mysterious Disappearance & Ambiguity: Now You See it, Now You Don’t; CGL Won’t Cover Cyber Liability Exposure; Two Crime Coverage Additions Jerome Trupin

Guest Article: Where Has Carpal Tunnel Syndrome Gone? Donald T. DeCarlo

On the Level: Who CARES? N. Stephen Ruchman

In the Associations: CAS Surpasses 7,000 Members, Indicating Continued Growth into Emerging Fields, Markets

In the News: Verisk Develops New Tool to Estimate Roof Age for Residential Properties

[AD FEATURES] 9

NYIA: 2016 Conference

PIA: Webinars

info@insurance-advocate.com www.insurance-advocate.com INSURANCE ADVOCATE / March 28, 2016 5

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[ EXPOSURES & COVERAGES ]

JEROM E TRUPIN, CPCU

Mysterious Disappearance & Ambiguity: Now You See it, Now You Don’t CGL Won’t Cover Cyber Liability Exposure Two Crime Coverage Additions uThe mysterious disappearance exclusion is now even more mysterious. It was once commonplace in property “all-risk” forms and some named peril forms added it to theft coverage by saying that mysterious shall be presumed to be due to theft. However, it has disappeared from most standard property forms. But not all, as Michael Britt’s father discovered when his son’s live-aboard sailboat went missing. Michael’s father said that in early September 2011, Michael telephoned and told him that he was taking a job driving a commercial truck. Because he had to attend orientation for his new job in Oklahoma City, he said that he planned to sail from West Palm Beach to Jacksonville, store the boat in Jacksonville, and rent a car in Jacksonville to drive to Oklahoma City. Michael’s father said that Britt telephoned him on September 15, 2011 and told him he would arrive in Jacksonville later than anticipated, but would call when he arrived. Britt’s father said that that call never came and that no one had seen Britt or the sailboat since September 15, 2011, when the Coast Guard had made a random inspection of the boat. In October 2011, Britt’s father contacted St. Paul to report the sailboat as lost. On February 14, 2012, Britt’s father was appointed conservator of his son’s estate and filed a claim with St. Paul Fire & Marine for the lost sailboat. St. Paul denied the claim saying that the disappearance of the sailboat fell under the mysterious disappearance

exclusion in Britt’s policy. Britt’s father sued St. Paul for loss of the sailboat.1 The trial court granted summary judgment to Michael’s father. Summary judgment is granted when the court feels that there is no dispute as to the facts and that one party is entitled to judgment as a matter of law. Nevertheless, St. Paul appealed and the Alabama Supreme Court reversed in favor of St. Paul. It held that the boat’s disappearance was “so unknown, puzzling or baffling that it made the disappearance inexplicable and that a person of ordinary intelligence would hold it to be mysterious.” It sent Michael’s estate away empty-handed. I asked Robert Tugander, Esq. at Rivkin Radler if he knew whether this issue had ever been litigated in New York. He referred me to a interesting New York case: McCormick & Company, Inc., v. Empire Insurance Group, et al. 2 McCormick had stored 480 bags of black pepper at Jay Storage. When McCormick sent a truck to pick up the stored bags, 280 could not be found. Empire declined coverage citing an exclusion for mysterious disappearance that read: Insurance provided under this policy shall not apply as respects any liability or expense for: ... (l) Unexplained loss, mysterious disappearance, or loss or shortage disclosed on taking inventory.” The court ruled that the words “disclosed on taking inventory” might apply to all three possible causes (unexplained

Jerome “Jerry” Trupin, CPCU, is a partner in Trupin Insurance Services located in Sleepy Hollow, NY. He provides property/casualty insurance consulting advice to commercial, nonprofit and governmental entities. He is, in effect, an outsourced risk manager. Jerry has been an expert witness in numerous cases involving insurance policy coverage disputes and has taught many CPCU and IIA courses. Jerry has spoken across the country on insurance topics and is the co-author of over ten insurance texts used in CPCU and IIA programs including Commercial Property Risk Management and Insurance and Commercial Liability Management and Insurance. He regularly contributes articles to CPCU Society publication, the Insurance Advocate®, and others. He can be reached at jtrupin@aol.com. Thanks to Jerry Trupin for this article and to the CPCU Society for letting us reprint it.

loss, mysterious disappearance, or loss or shortage) and therefore might only exclude losses that involve an inventory calculation. Since insureds are entitled to the benefit of the interpretation that favors their position, the court granted McCormick’s motion for summary judgment. In another case, the Court of Appeals (New York’s highest court) declined to apply this precedent to another mysterious disappearance claim, so McCormick may not be binding for future cases involving mysterious disappearance.3 Furthermore, since there is no standard wording, each case is governed by the facts in that case. What is fascinating about the McCormick CONTINUED ON PAGE 8

1 The discussion of the claim is based on Robert Tugander’s article Alabama Supreme Court Enforces “Mysterious Disappearance” discussing St. Paul Fire & Marine Ins. Co. v. Britt, No. 1140423 (Ala. Jan. 29, 2016) http://www.rivkinradler.com/publications/alabama-supreme-court-enforces-mysteriousdisappearance-exclusion-in-case-of-a-missing-sailboat/ 2 McCormick & Company, Inc., Plaintiff-appellee, v. Empire Insurance Group, Allcity Insurance Company, Empire Mutual Insurance Company, Defendantsappellants, 878 F.2d 27 (2d Cir. 1989), http://law.justia.com/cases/federal/appellate-courts/F2/878/27/167342/ 3 The case is Maurice Goldman & Sons, Inc., Appellant, v. Hanover Insurance Company, 80 N.Y.2d 986, 607 N.E.2d 792, 592 N.Y.S.2d 645 (1992), November 18, 1992. Thanks to Ed Kennelly, JD CPCU of Wood, Smith, Henning & Berman LLP for locating this case.

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[ EXPOSURES & COVERAGES ] CONTINUED FROM PAGE 6

decision is the court’s explanation of what is needed to establish ambiguity: “Under New York law...any ambiguity in an insurance clause must be resolved against the insurer and in favor of the insured.... Upon review of the language...the Court concludes that the exclusionary clause in the Jay Storage policy is ambiguous and subject to two constructions. The defendants propose a construction in which each separate clause in the section could cover a different type of loss, so that an unexplained loss would be excluded from coverage.4 “Construing the ambiguous clause most favorably to the insured, the Court concluded that the policy must be read to apply only to inventory losses or losses appearing on taking inventory. Since it is undisputed that the missing pepper was delivered to Jay Storage’s warehouse and stored there...this loss is covered by the policy issued by the defendants to Jay Storage.”5 Notice that it isn’t necessary for the insured to show that its interpretation is the best possible interpretation, only that it is a plausible interpretation. To put it in baseball terms, in the event of a tie, the runner (think insured) wins.

CGL Won’t Cover Cyber Liability Exposure Five Guys Burgers & Fries grew from a one-location carry-out burger joint in 1996 to a franchise chain of over 1,000 locations in 47 states and six Canadian provinces today. Unfortunately, it doesn’t look like its insurance kept pace. One of its franchisees, RVST Holdings, a group of Five Guys franchises in upstate New York, stored customers’ credit card information on its own computer network. Hackers apparently penetrated network security and used the stolen credit card information to make numerous fraudulent

charges. Schenectady-based Trustco Bank sued RVST alleging that RVST had failed to exercise reasonable care in safeguarding the information of Trustco cardholders. Trustco had refunded over $90,000 to its cardholders for fraudulent charges and wanted reimbursement for that expense. RVST had no cyber coverage, so it sought coverage under its commercial property policy, but ISO had

Every insured that accepts credit cards needs cyber coverage.

closed that door after the Ingram Micro (Ingram) disaster. For those of us without total recall, Ingram Micro, a wholesale distributor of microcomputer products, lost specialized computer programming due to a power failure. When power was restored, the computers reverted to their original programs rather than the specialized ones Ingram had installed. During the time it took to reprogram, Ingram was unable to do business. American Guarantee & Liability, which provided Ingram’s business income coverage, rejected its claim saying that computer data was not physical property and the policy required direct damage to physical property to trigger coverage. Ingram, of course, sued. The court ruled in its favor, holding that, in effect, loss of functionality equaled physical damage.6 The Ingram decision sent tremors through the insurance industry and, as is its wont when there’s an unfavorable court decision on a potentially serious issue, ISO jumped in with coverage changes. In keeping with the double-barreled defense strategy that ISO adopted for the pollution problem in the 1980s, it added electronic data (broadly defined) to the list of property not covered, as well as adding an additional coverage for electronic data. It might seem that an additional coverage expands coverage, but the limit for the new additional coverage is only $2,500; it is more an exclusion than a coverage. It’s true that

the sublimit can be increased by entering a higher limit on the declaration page, but few insurers are willing to do that. More pertinent to the RVST case, ISO also added an electronic data exclusion to the CGL form: Exclusions This insurance does not apply to:... Damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data (again, broadly defined). The court in the RVST case noted that it is settled law that an insurer’s duty to defend its insured is “exceedingly broad.” Nevertheless, it held that it is also settled law that an insurer is not obligated to provide a defense when it can “demonstrate that the allegations of the [underlying] complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation.” The court felt that the insurer had met its burden of proof and sent RVST home with nothing more than a stack of legal bills. PRACTICE POINT. Every insured that accepts credit cards needs cyber coverage. Even if they outsource credit card processing, they can still be dragged into a nasty lawsuit. In fact, outsourcing credit card processing may increase their chances of being sued because they can be named as a co-defendant along with all the other clients of the processing firm. This enables plaintiffs’ attorneys to increase the number of defendants who can fund the settlement and usually increases the size of the settlement.

Two Crime Coverage Additions; Volunteers & Employee Theft From a Firm’s Customers7; Crime Coverage for Volunteers Volunteers don’t get paid, but they can cost a non-profit lots by helping themselves to the non-profit’s funds, as countCONTINUED ON PAGE 10

4 McCormick op. Cit. 5 Ibid 6 American Guarantee & Liability Insurance Co. v. Ingram Micro, Inc., Civ. 99-185 TUC ACM, 2000 U.S. Dist. Lexis 7299 (D. Ariz., April 19, 2000). 7 Ruben Vives “Ex-treasurer for O.C. congressman charged in alleged $300,000 embezzlement scandal” Los Angeles Times 2/2/16, http://www.latimes.com/local/lanow/la-me-ln-treasurer-congressman-embezzlement-scandal-20160202-story.html

8 March 28, 2016 / INSURANCE ADVOCATE

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[ EXPOSURES & COVERAGES ] CONTINUED FROM PAGE 8

less non-profits have found to their dismay. In one case, the volunteer treasurer for a congressional campaign is accused of embezzling $238,000 from the campaign’s funds. To prove that lightning does strike twice, it’s alleged that he used some of the money he stole from the campaign to repay thefts from his previous employer. A particularly egregious current example is the report that Preet Bharara, U.S. Attorney for the Southern District of New

York, is investigating a multi-million dollar shortage in the Mahopac, NY Volunteer Fire Department’s accounts.8 (At this writing, it’s not known whether a volunteer or employee is implicated, but either way it’s clear that non-profits, like any other enterprise, need crime insurance.) So, how is embezzlement by volunteers handled by crime insurance? The ISO crime form does not specifically mention volunteers, but coverage is limited to “employees,” which is defined as follows: (1) Any natural person (a)...in

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Volunteers do not receive salary, wages or commission. If they did, they would be employees, not volunteers. Embezzlement by volunteers can be added to crime coverage.

your service or for 30 days after termination of service; (b) Whom you compensate directly by salary, wages or commissions (emphasis added); and (c) Whom you have the right to direct and control while performing services for you.... Volunteers do not receive salary, wages or commission. If they did, they would be employees, not volunteers. Embezzlement by volunteers can be added to crime coverage. ISO has two specific endorsements to add volunteers: CR 25 09, “Include Volunteer Workers as Employees,” amends the definition of employee to include uncompensated individuals performing duties usual to employees or acting as funds solicitors during fund-raising campaigns. CR 25 10, “Include Volunteer Workers Other Than Fund Solicitors as Employees,” amends the definition of employee to include any uncompensated natural person other than one who is a fund solicitor, while performing services for the named insured that are usual to the duties of an employee. Insurance producers are often involved with non-profits. Before you start soliciting local fire departments, remember “physiCONTINUED ON PAGE 15

8 David McKay Wilson, “Mahopac VFD confirms probe for missing millions” The (Westchester County) NY Journal News 10/7/2015 http://www.lohud.com/story/money/personalfinance/taxes/david-mckaywilson/2015/10/06/mahopac-volunteer-firedepartment-probed-missingmillions/73439122/

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[ GUEST ARTICLE ]

D O N A L D T. D E C A R L O

Where Has Carpal Tunnel Syndrome Gone? uCarpal Tunnel Syndrome (“CTS”) is a gradual injury that was described as the next crisis in workers’ compensation claims in the 1990s, and that has fortunately evolved into routine claims with no expected surge. “At its height of diagnosis, anybody showing up at a doctor’s office with wrist pain or hand pain was being diagnosed with carpal tunnel,” said Carol Harnett, vice president of insurer Hartford Financial Services Group Inc.’s group benefits division. People have learned to adapt and have adjusted their behaviors to compensate for potential problems. For example, occasional shoulder pangs caused by using a mouse pushed far rightward by a typically bulking modern keyboard. Switching to a laptop keyboard and allowing the hand to come back to the center fixed the problem. The correct clinical name is Median Nerve Compression Neuropathy. According to the AMA Physicians Guide to Return to Work, “CTS is actually a condition with known pathology and not a syndrome, but the name carpal tunnel syndrome has become so well known that CTS is used rather than median nerve compression neuropathy.” Although the popular belief is that keyboard use causes CTS, the science shows otherwise. Nine studies have reviewed this relationship, including The Mayo Clinic, Harvard Medical School, and a Swedish study reported in Orthopedics Today, demonstrate that “there is no causal relationship between CTS and computer keyboarding.” The scientific research shows that keyboards are safe to use and do not cause CTS. Furthermore, keyboard design has no effect on the incidence of CTS. Symptoms may increase with many activities, including the use of keyboards, but keyboards do not cause CTS. What complicates the diagnosis and treatment of CTS is that there are multiple causes for CTS which include diabetes, pregnancy, various vitamin deficiencies, insufficient water consumption, exposure 14 March 28, 2016 / INSURANCE ADVOCATE

to cold temperatures, smoking, playing musical instruments, recreational sporting activities and other non-work-related activities.

Medical studies have shown that up to 85 percent of patients who are told they have CTS are misdiagnosed.

Medical studies have shown that up to 85 percent of patients who are told they have CTS are misdiagnosed. Yet in the workers’ compensation industry the overwhelming number of cases are determined to be work-related, and it has been reported that up to 70 percent go on to receive CTS surgery. Carpal tunnel syndrome is a frequently cited example of gradual injury. There has been a significant amount of litigation over the compensability of carpal tunnel claims. In the majority of instances, the claims have been found compensable. A number of states have specifically amended their statutes to address claims for carpal tunnel syndrome or repetitive trauma. In certain cases, such claims are included within the definition of injury. Alabama defines injury to include physical injury caused either by carpal tunnel syndrome disorder or by other cumulative trauma disorder if either disorder arises out of and in the course of the employment. In Arkansas, carpal tunnel syndrome is specifically categorized as a compensable injury. Connecticut’s definition includes a personal injury to an employee that is causally connected with his employment and is the direct result of repetitive trauma or repetitive acts incident to such employment. And a final example is found in Kentucky where the term injury means “any work-related traumatic event or series

Donald T. DeCarlo, Esq. is the principal of an independent law firm in Lake Success, NY, which focuses on mediation/arbitration and regulatory and insurance counseling. Before establishing the firm in 2005, Mr. DeCarlo was a Partner at Lord Bissell & Brook LLP and headed its New York office. Formerly, he was Senior Vice President and General Counsel of The Travelers Insurance Companies, Deputy General Counsel for its parent corporation Travelers Group, Inc. and Executive Vice President and General Counsel for Gulf Insurance Group. Mr. DeCarlo is a Certified ARIAS-US Arbitrator and Umpire, a Master Arbitrator for the NYS Insurance Department, and an Arbitrator for the American Arbitration Association and Center for Dispute Resolution. Mr. DeCarlo is also the Founder, Chairman and President of The American Society of Workers Comp Professionals, Inc. (AMCOMP). In addition, Mr. DeCarlo is a Director of 17 companies in the insurance industry. Mr. DeCarlo has authored numerous scholarly articles in legal and trade journals and is a co-author of two books on workers compensation insurance, Workers Compensation Insurance & Law Practice – The Next Generation and Stress in the American Workplace – Alternatives for the Working Wounded. Mr. DeCarlo Chairs an Advisory Committee of the World Trade Center Captive Insurance Company, and formerly served as Chairman and Commissioner of the New York State Insurance Fund (NYSIF) for 10 years. He also served as an Inspector for the NYS Athletic Commission.

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of traumatic events, including cumulative trauma arising out of and in the course of employment which is the proximate cause producing a harmful change in the human organism evidenced by objective medical ﬁndings.” A number of states include reference to repetitive injury or cumulative trauma syndrome under the definition of occupational disease. In Louisiana, an occupational disease includes injuries due to work-related carpal tunnel syndrome. Missouri also recognizes repetitive motion injuries, and in Texas, the term occupational disease is defined to mean a disease arising out of and in the course of employment that causes damage or harm to the physical structure of the body, including a repetitive trauma injury. “Repetitive trauma injury” means damage or harm to the physical structure of the body occurring as the result of repetitious, physically traumatic activities that occur over time and arise out of and in the course and scope of employment. California uses a different approach to cumulative injury. Under its law, a covered injury may be “specific” or “cumulative.” A cumulative injury is defined as one occurring as repetitive mentally or physically traumatic activities extending

over a period of time, the combined effect of which causes any disability or need for medical treatment. For purposes of clarity, California defines the date of injury for occupational disease or cumulative injuries as “that date upon which the employee first suffered disability therefrom and either knew, or in the exercise of reasonable diligence should have known, that such disability was caused by his present or prior employment.”

Conclusion Whether cumulative injuries are compensable depends on the state in which the claim is filed. When a state draws any distinction between a cumulative injury and an event-specific injury for purposes of determining compensation under workers’ compensation, how the injury is characterized makes all the difference in whether there will be compensation. The new vintage workers’ compensation claim of the 1990s – CTS and mental stress claims and a myriad of other claims – have been dealt with in an effective manner within the 100year-old workers’ compensation system. For those advocating abolishing workers’ compensation, consider how CTS and mental stress claims would be compensated without workers’ compensation.[IA]

EXPOSURES & COVERAGES CONTINUED FROM PAGE 10

cian heal thyself.” Tell the non-profits you’re involved with that they need crime coverage and get their accountant involved in helping them set a limit of coverage. (It’s Be-Kindto-Your-E&O-Insurer Week!)

Crime Coverage for Employee Theft From a Firm’s Customers In addition to property the insured owns or leases, the crime policy covers property that the insured holds for others, or for which the insured is legally liable, except for property inside the premises of a “client” of yours (emphasis added). So the question here is how do you cover loss to the excluded property of a client? Again it’s ISO to the rescue. ISO endorsement CR 04 01 08 13 is available to add coverage for theft of a client’s money, securities and other property by the insured’s employee. Some caveats: • “Client” means an entity for whom the insured performs services under a written contract. Insurance producers, for one, have numerous clients but seldom have written contracts with them. That’s true for many other firms. That doesn’t relieve them of possible liability for the loss of a client’s property. If they have the exposure, tell them they need both the endorsement and a contract. • The guilty employee must be identified. Circumstances that point to an insured’s employee or employees may not be sufficient. • The claim must be presented by the insured. The client does not have any rights under the endorsement. • “Other property” is subject to the same limitations as in the basic form. That is, the lost property must be tangible and have intrinsic value. It does not include computer programs, electronic data or any other property specifically excluded. Crime coverage, in the words of Rodney Dangerfield, “don’t get no respect.” That’s unfortunate. Even relatively modest entities can incur multi-million dollar losses—estimates of the Mahopac loss run as high as $5,000,000 and the Roslyn School District lost over $10,000,000 to employee dishonesty a few years ago. Tell your clients about crime insurance and show how you can tailor it to their needs.[IA] INSURANCE ADVOCATE / March 28, 2016 15

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PIA Market Trends Survey:

Agents See Moderation in Rate and Underwriting Severity

GLENMONT, N.Y.—The Professional Insurance Agents of Connecticut, New Hampshire, New Jersey and New York State released the findings of their annual Market Trends Survey, conducted through the month of January. Some 200 agents participated in the survey, which has been conducted every year since 2012, after a renovation of the associations’ original “Hard Market Survey” of the early 2000s.

16 March 28, 2016 / INSURANCE ADVOCATE

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uThe survey asked producers in the four PIA affiliate states if their clients are experiencing increases or decreases on various lines of busi ness (personal auto, homeowners, commercial property, and commercial liability) and if their carriers’ underwriting guidelines are tightening or relaxing over the past year. Consistent with the past four years, respon dents told PIA that prices are rising, while underwriting continues to tighten. However, the extent to which respondents in the survey say they are experiencing this rise seems to have relented somewhat. When asked to what extent underwriting guidelines are becoming more strict, 32 percent of respondents indicated a “moderate change” in the underwriting approach to homeowners, reflecting a downward shift from 34 percent last year. Additionally, 13 percent of respondents said they’ve experienced a “significant change,” compared to 36 percent last year. A similar trend was reflected in pricing. Eightyfive percent of respon dents said homeowners rates have increased over the past year, down from 91 percent who reported an increase in 2015. Similarly, 80 percent of respondents said they’ve experienced no, or minor, increases in nonrenewals in both personal and commerciallines policies, compared to a majority (63 percent) who reported minor to mod erate increases in nonrenewals last year. Fifty percent of respondents re ported no change in nonrenewals for personal auto in this year’s survey. In terms of underwriting changes (for both personal and commercial business), 56 percent of respondents reported minor to moderate changes in underwriting in this year’s survey. This reflects a decrease from last year, when 61 percent of respondents indicated “moderate to significant” changes. “It appears that the stringent underwriting is loos ening its hold,” said PIA Director of Business Issues Jim Pittz, CIC, CPIA. Additional findings from the survey also indicate a moderation in market conditions. These include: 39 percent of respondents reported placing less than five percent of their business through wholesalers and 82 percent of respondents said they have increased their marketing efforts over the last year. “PIA wants to thank all of its members who participated in the Market Trends Survey,” said Pittz. “Input from the agency itself is unique and an important way for us to measure coverage availability and cost.”[IA]

INSURANCE ADVOCATE / March 28, 2016 17

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[ ON THE LEVEL ]

N. STEPHEN RUCHMAN, CPIA

Who CARES? uIt was welcome news to agents last month when Google announced it would withdraw from the online insurance sales business. It turned out Google Compare, the online auto insurance comparisonshopping tool, was not a big hit and after just a year, the search engine said it would fold its price comparison services. According to the Associated Press, “Google told participating auto insurers and lenders in a letter that the comparison service didn't attract as much traffic as it anticipated and it would close on March 23.” I wasn’t surprised to learn this. I’m not denying the fact that we’ve endured the commoditization of our product, particularly in auto; but as I’ve said for years, the Internet can’t offer the important benefits professional, independent agents bring to the interaction. There’s a human connection and an element of trust that makes us the best sales distribution option for carriers and customers alike. We are resilient, optimistic and driven. We are “people people” – we genuinely CARE about our clients and our communities, and that makes all the difference. The successful agency and its employees are integral parts of their communities: Agents sit on school boards; they participate in their houses of worship; they are volunteer firefighters; they are members of their chambers of commerce. Some time ago, I wrote about how big box stores had come to my town and tried to push out the smaller merchants. They never joined the chamber; they didn’t care about the community. On the other hand, the small merchants keep the community going, and vice versa. The same dynamic plays out with direct writers and Internet sales of insurance. They don’t give a damn about where their clients are. You never see a little league team with a box store or search engine name on the t-shirts. They don’t care. In all, this is good news for independent agents. As the big box guys retreat from small accounts and the market those represent – we professional independent agents will be here ready to take our clients back like proverbial prodigal sons. We’ve always been happy to serve small and 18 March 28, 2016 / INSURANCE ADVOCATE

medium accounts. Because we care. But we do. We agents give back to our communities every chance we get. Take, for example, my work with the UJA Federation. I am proud to have been chair of the UJA Long Island Insurance

There’s a human connection and an element of trust that makes us the best sales distribution option for carriers and customers alike. We are resilient, optimistic and driven. We are “people people” – we genuinely CARE about our clients and our communities, and that makes all the difference.

Division’s Annual Dinner in the past. Justin Fries has taken over as the division chair and this year UJA will honor Steve Diamond, president and owner of the Simon Agency in New York on May 11, 2016 at the Woodbury Jewish Center, Woodbury, N.Y. (Opportunities to sponsor and attend are open now.) Unfortunately for our community, many agents are silent when it comes to electing the officials that have so much power to shape our communities. Last month, Politico published a list of the top10 political action campaign donors in New York state. The list is interesting. It includes individuals, associations and corporate entities. The Trial Bar Association is the second biggest contributor to political campaigns in New York state—right behind a former hedge-fund executive, a major supporter of charter schools and education reform, who wrote two $500,000 checks to the state Democratic Committee’s housekeeping account. Then there are corporate

N. Stephen Ruchman, CPIA , is a retired independent agent and founder of Ruchman Associates, Inc. the agency he started in 1961. A past president of the Professional Insurance Agents of New York State, Inc., he is an active supporter of PIANY, and he has sat on or chaired nearly every committee including the Executive Committee and the Long Island Advisory Council and PIANY’s Political Action Committee. He can be reached via email at : nsruch man@gmail.com.

entities like Verizon, as well as some rich associations on the list. I’m sad to report independent agents aren’t anywhere near making that list. Everyone knows this is a big election year. We need to support our associations in their legislative efforts. Politics can be distasteful, but the reality is that this is the system in which we live and operate, and we need to be realistic about contributing. As PIANY’s PAC Chair Rich Savino recently observed, “We all know that PIANY’s success in the state legislature starts at the voting booths, where we choose who will make critical choices on our behalf. With the 2016 election season, this is a critical time when our friends in the legislature need, and rely on, our support.” I encourage everyone to make sure they’ve contributed generously to their associations’ political action campaigns. Let’s give to our PAC like we give to the rest of our communities. PIANYPAC and UJA Federation are both great examples of how independent agents can and do care about our neighbors, colleagues, families, and friends. Contributions to these organizations, as well as volunteering and participating in our communities are important ways we can ensure the success of our business, our industry and our future. Who cares? Professional agents, that’s who. [IA]

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[ IN THE ASSOCIATIONS ]

CAS Surpasses 7,000 Members, Indicating Continued Growth into Emerging Fields, Markets Leading Actuarial Society Expands as Members Tackle Climate Change, Big Data, Cyber Risk

uARLINGTON, VA–The Casualty Actuarial Society (CAS) reached the 7,000 member milestone this year with its newest class of Fellows and Associates, with membership consisting of 4,942 Fellows, 2,235 Associates, and 20 Affiliate members, for a total of 7,197 active members. From international seminars to regional meetings, CAS fuels continued growth by providing more than 100 continuing education opportunities each year, developing new programs to encourage members to pursue the opportunities created by technological advancements and emerging fields. Over the past 100 years, CAS has been at the forefront of actuarial innovation in the property and casualty field, supporting the profession as it expands to tackle new and emerging issues such as climate change, automated vehicles, and cyber liability. CAS members are using their capabilities with skills such as predictive mod20 March 28, 2016 / INSURANCE ADVOCATE

eling to deliver business value in a wide range of areas, including underwriting, pricing, claims management, sales and marketing, and financial forecasting. Established in 1914, CAS was originally named the Casualty Actuarial and Statistical Society of America. The charter class totaled 97 Fellows – the only classification for members at the time. In 1921, the organization adopted its current name, the Casualty Actuarial Society, and by 1972 CAS had more than 500 members. The 1980s saw membership double, with CAS reaching 1,000 members in 1983. By 1993 membership had doubled again to 2,000. Greater awareness of the profession through consistently high ratings in the Jobs Rated Almanac in the 1990s through the 2000s fed membership growth, as CAS doubled again to 4,000 members in 2005, reached 5,000 in 2010 and 6,000 in 2013, until achieving the 7,000 member mark this year.

The Casualty Actuarial Society (CAS) is a leading international organization for credentialing and professional education. CAS credentials demonstrate the expertise to identify, analyze and advise on the potential financial impact of risk and uncertainty. Professionals educated by CAS empower business and government to make well-informed strategic, financial and operational decisions.

“The resources CAS provides continue to drive membership forward, helping actuaries adapt to the changing landscape of risk management. New programs such as The CAS Institute, which will offer a credential in data science and predictive analytics, offer the opportunity to certify specialized knowledge in emerging fields. All of our resources continue to have practical applications on the job, which allows our members to bring even greater value to their organizations,” said CAS President Stephen P. Lowe, FCAS. CAS also continues to expand its membership internationally, launching a new CAS Regional Affiliate, Asia Region Casualty Actuaries (ARECA), which hosted seminars in both Beijing and Singapore in 2015. CAS also co-sponsored a ratemaking seminar in Kuala Lumpur last fall and participated in the 19th Annual Asian Actuarial Conference in Thailand last November. In addition, CAS recently entered into a mutual recognition agreement with Institute of Actuaries of India (IAI). The agreement allows IAI to join the Institute and Faculty of Actuaries in the U.K. and the Actuaries Institute in Australia as organizations with which CAS has established mutual recognition. “Much of our international growth and recognition is due to our efforts to provide education and research to help our members become leading experts in property and casualty insurance. The resources currently in development will continue this tradition and will be a major driving force for CAS to reach even larger membership milestones in the future,” stated Lowe. For more information on The CAS Institute, visit TheCASInstitute.org.[IA]

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[ IN THE NEWS ]

Verisk Develops New Tool to Estimate Roof Age for Residential Properties uJERSEY CITY, N.J.—Verisk Insurance Solutions, a leading source of information about property/casualty insurance risk, announces Verisk’s Roof Age solution, which is designed to help U.S. residential property insurers more accurately determine the age of a roof. The new solution was built in conjunction with BuildFax, a leading provider of historical building permit data. Verisk Insurance Solutions is a Verisk Analytics (Nasdaq:VRSK) business. “The next generation of insurance carriers demands timely and actionable property-level insights – especially when it comes to key risk factors like a structure’s roof,” said BuildFax Founder and CEO Holly Tachovsky. “Leveraging unique BuildFax and Verisk assets, we’ve created just such a solution.”

Over the past five years, wind and hail perils have accounted for almost 40 percent of all losses…

Validating roof age is difficult and expensive for the industry. Roof age estimates are often based on year of construction, an inspector’s visual estimate, or generally less accurate information provided by a homeowner. Accounting more accurately for roof age in coverage and premium determinations balances risk management decisions and fair pricing for policies with older and newer roofs. “Repairing or replacing roofs is a sig-

nificant claims expense for the property insurance industry,” explained Steve Lekas, senior vice president for Verisk Insurance Solutions. “Appropriately underwriting roofs is a challenge for insurers, particularly as it relates to obtaining quality data with which to segment risk. Verisk’s Roof Age allows insurers to gain more accurate insights into roof age, an important predictor of the likelihood and extent of future roof loss.” Over the past five years, wind and hail perils have accounted for almost 40 percent of all losses, averaging approximately $15 billion annually–and growing each year, according to ISO’s Actuarial Service. As a roof ages, it loses its strength, increasing the frequency and severity of losses over time. The foundation of Verisk’s Roof Age solution is the BuildFax roof permit database covering more than 10 million homes in the United States. Verisk’s team of data scientists adds layers of diverse and unique data assets to estimate the roof age if permit data for the property is not available. The model provides an estimated address-level roof age and a confidence score.[IA]

Since 1986, we have been a leading provider of commercial property casualty insurance for luxury coopera ve, condominium and rental buildings along with ﬁne dining restaurants.

a W. R. Berkley Company

INSURANCE ADVOCATE / March 28, 2016 21

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[ THE SOCIAL NOTEBOOK ]

C H R I S PA R A D I S O

“The Talk of the Town” – You and Your Agency uIf your agency isn’t all the rave with word-of-mouth referrals, I’m here to tell you that all of your digital marketing efforts are directly correlated to the amount of referrals your agency receives. You may think that’s ludicrous because, traditionally speaking, having outstanding “customer service” is what will drive wordof-mouth referrals. Well, I’m here to tell you that that’s not necessarily true; when it comes down to it, the customer’s overall experience – providing a rewarding customer experience for all of your customers and clients – is what truly drives word-ofmouth referrals for you and your agency. Now, you may be thinking they are relatively similar, but providing good customer service and providing a rewarding customer experience are two entirely different things. The customer service is a customer’s actual interaction with your agency. This extends to how they were greeted coming into your agency, how your staff treated and handled them, or how you helped them out with their problems. The customer experience is something distinctly different; this starts from the moment that a prospect realizes they are in need of your agency’s service, and never ends unless you lose them as a customer. The customer experience includes why a customer reached out to you in the first place, how easy it was to find your agency when they looked you up online, or how you nurture the relationship with the customer even outside of the office. This client relationship nurturing heavily includes the use of digital marketing, especially social media marketing, where you can connect with your customers and clients on a personal basis. So let’s talk about the correlation between social media marketing and the amount of word-of-mouth referrals your agency receives, and how these two strategies are directly related.

Referral Based Marketing Here’s something you may not have realized…83% of satisfied customers are more than willing to talk about your 22 March 28, 2016 / INSURANCE ADVOCATE

By providing an “I’ll scratch your back, you scratch mine” situation for our customers, it makes them more willing to reach out to our agency to give us referrals.… You have to push a little before you can pull.

agency’s products and/or services, but only 29% actually take the initiative to do so (statistic provided by referralcandy.com). So that means, as an agency, we worked hard to make sure a customer had a fantastic customer experience, to the point where they are willing to talk about how great we did at servicing them, but there is a disconnect when it comes to them making the conscious decision to refer you to a family member or friend. Referralbased marketing is where you can nurture your audience and bridge the gap. Referralbased marketing is an approach to marketing where the purpose is to influence your audience in order to remind them to refer their friends/family or point them in the direction of your referral program.

The “How-To” Behind the Strategy Like sales, referral-based marketing can’t always be bluntly obvious; you can’t just hop on social media and ask for referrals because that simply won’t work. If you have a referral program though, that can definitely come into play here. At our agency, Paradiso Insurance, my in-house marketers (I strongly believe every agency should hire marketing professionals to learn your brand and work for you full time) develop engaging visual content for our digital marketing that reminds our customers of our referral program. For every referral that our agency receives,

Christopher Paradiso, CPIA , is President of Paradiso Financial & Insurance Service. He has been acknowledged by several insurance publications as a leader in the industry for his use of digital marketing and social media to help brand his agency and promote other small businesses within his community. Chris has also been recognized for his charity work with The Connecticut Children’s Medical Center. In 2011, Chris introduced “Paradiso Presents LLC,” a social media program aimed at teaching small agencies to not only survive, but compete in today’s complex online marketing world. Chris resides in Stafford Springs, CT with his wife and two children, Mia and Gianni.

whether or not we sign the referral’s insurance policy, we always give the referrer a $25 gift card. By providing an “I’ll scratch your back, you scratch mine” situation for our customers, it makes them more willing to reach out to our agency to give us referrals (and believe me, a $25 gift card will go a long way with your customers/clients and will pay for itself with the amount of referrals you can earn that way). You have to push a little before you can pull. Now, other than marketing with the direct, obvious intent of looking for referrals, you can be focusing your digital marketing efforts on tactics that will subconsciously remind your audience that your agency thrives on referrals. Referrals are the number one source of new business, to this day, so when I say that your agency thrives on referrals…I mean it; that’s a message that you need to convey to your audience, though without sounding selfish or greedy. One way you can accomplish this is through consistent branding. Your brand is present in all aspects of your digital marketing if you have the right strategy going in. You should speak in your

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[ IN THE ASSOCIATIONS ] agency’s branded tone of voice, visually represent your brand in all of your visual content marketing, and even have branded videos, or your branded messages behind all of your posts. The thing about branding that’s so powerful is that it makes your interactions with your customers resonate with them, instead of just exist in the moment. Your brand allows your agency to sit in the back of your customers’ mind, so that when it comes time for Aunt Sue to get a new car and she needs to shop for an insurance policy that’s right for her, your customers will think to refer your agency.

Your Social Attitude Matters Another way you can accomplish referral-based marketing is to have a positive social attitude in all aspects of your digital marketing. Your social attitude is any way that a customer, client, or prospect interprets their interaction with your agency online. They can either see you as being a burden or annoyance if you push too much, a positive burst of energy to their day if you play your cards right on social media, or they could see your posts as upsetting and/or make them angry if you don’t have a strong approach with your social attitude/posts. You could also make your audience feel like they are speaking to a wall if you don’t give them a “like” or comment back when they engage on your posts, because they will feel like they were never heard in the first place if your agency doesn’t respond to them online. This is why the power of response is so important in the social world; if you don’t respond, it looks like your business is closed for business online, and that will hurt your social presence. Overall, referrals are to this day still pushing the success of our agencies, more so than any other form of new business. By focusing in on our digital marketing efforts, we can nurture the client relationships we already have to reach a number of agency referrals that we never dreamed of. Just to stress my point, I’ll share with you that my two in-house marketers have to reach a certain number of referrals as part of their bonus incentive, and they do nothing but strictly marketing for my agency. It is that important. Focus your marketing on nurturing client relationships and you’ll push your referrals, and heavily increase the ROI for your agency. Happy Marketing![IA]

The Griffith Insurance Education Foundation Awards More Than $100,000 in Scholarships uMALVERN, Pa.—Thirty-nine students from twenty-two different undergraduate and graduate programs were selected as recipients of The Griffith Insurance Education Foundation’s 2015 scholarship offerings. This past year’s scholarship funds totaled $106,500 and allowed these students to continue advancing their education in preparation for future careers in risk management and insurance. These scholarships support The Griffith Foundation’s efforts to inspire students to continue pursuing risk management and insurance careers, and are offered biannually. In addition to awarding its own scholarship funds, The Griffith Foundation also administers scholarships on behalf of insurance industry organizations. For example, each year, $42,000 is awarded to six students through the Westfield Insurance and Westfield Agents Association (WAA) Scholarships. “I was very happy to learn that I was a recipient of the Westfield and WAA scholarship, administered by The Griffith Foundation. I am now able to concentrate on what is important to me, which is education,” said Sarah Vachon, a student at Ball State University. “Thanks to the financial generosity of the Westfield and WAA scholarship, I have gotten one step closer to my goal.” Scholarship funds were awarded to students from the following institutions: • Appalachian State University • Ball State University • Bradley University • Butler University • California State University • California State University at Fullerton • Florida State University • Kent State University • Missouri State University • Morgan State University • Ohio Dominican University • Ohio State University

• Olivet College • St. John’s University • Temple University • Troy University • University of Alabama • University of Colorado • University of Louisiana • University of South Carolina • University of St. Thomas • University of Texas

“We had a large number of remarkable applications submitted by students this year and look forward to helping advance their education.…”

“I congratulate each of the spring 2015 scholarship recipients,” said Jason Terrell, The Griffith Foundation’s vice president. “We had a large number of remarkable applications submitted by students this year and look forward to helping advance their education. Such quality is a reflection of not only the students’ passion and capabilities, but also the work and dedication of their professors.” For a complete list of scholarship winners, visit www.GriffithFoundation.org /Higher-Ed/Scholarships. The Griffith Insurance Education Foundation, an affiliate of The Institutes, is a 501(c)(3) not-for-profit, nonadvocacy, educational organization that provides risk management and insurance education for students and public policymakers. The Institutes are the leader in delivering proven knowledge solutions that drive powerful business results for the risk management and property-casualty insurance industry. For more information, visit www.GriffithFoundation.org.[IA] INSURANCE ADVOCATE / March 28, 2016 23

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[ ON MY RADAR ]

BA R RY Z A L M A

The Examination Under Oath

The Reasons for the EUO uThe insurance Examination Under Oath (“EUO”) is a formal type of interview authorized by an insurance contract. It is taken under the authority provided by a condition of the insurance contract that compels the insured to appear and give sworn testimony on the demand of the insurer or find his, her or its claim rejected for breach of a condition. A notary and a certified shorthand reporter are always present to give the oath to the person interviewed and record the entire conversation. The EUO is a tool used sparingly by insurers in the United States when a thorough claims investigation raises questions about the application of the coverage to the facts of the loss, the potentiality that a fraud is being attempted, or to assist the insured in the obligation to prove to the insurer the cause and amount of loss. Although rarely used, the EUO is an important tool needed by insurers when there is a question of coverage. Courts that construe submission to an EUO as a condition precedent to recovery generally do not require the insurer to prove that it suffered actual prejudice from an insured’s unexcused refusal to submit to an examination. Lorenzo–Martinez v. Safety Ins. Co., 58 Mass. App. Ct. 359, 790 N.E.2d 692, 695–96 (2003). The EUO provides a mechanism for the insurer to corroborate the claim by obtaining information that is primarily or exclusively within the possession of the insured. The adjuster, the independent adjuster, the Special Investigation Unit (SIU) investigator, the independent insurance adjuster and, in complex cases, the attorney retained to represent the insurer questions the person interviewed in a manner similar to a deposition in a legal proceeding. Because of the formality of the proceeding — it includes an oath and the presence of a certified shorthand reporter — the task of establishing rapport with the person interviewed so that relevant information may be obtained from the insured is more difficult than in an informal interview. Unlike legal proceedings where questions are limited to those seeking a “yes” or “no” or brief answer the EUO seeks narrative 24 March 28, 2016 / INSURANCE ADVOCATE

responses from the person questioned. The person taking the EUO, therefore, must be capable of transitioning from lawyer-like questions in litigation to the broad, inquisitive, narrative seeking questioning. An EUO should never be conducted as if it is an adversarial activity but

Often, however, the purpose of the EUO is not to stop fraud but to allow an insured the opportunity to prove his or her claim of loss in cases where evidence has been destroyed by a casualty or is otherwise unavailable.

merely a fact seeking activity that is directed to the needs of an insurance policy and the need to prove a loss is either compensable or not. Because the EUO is a tool for gleaning the maximum amount of information, the EUO is an effective weapon against insurance fraud. This is because the person taking the EUO is knowledgeable about insurance and insurance law while the person being questioned is only aware of the claim presented and the fraud he or she may be attempting. Often, however, the purpose of the EUO is not to stop fraud but to allow an insured the opportunity to prove his or her claim of loss in cases where evidence has been destroyed by a casualty or is otherwise unavailable. The authority to take an EUO is provided by the insurance contract and exists as a result of statutes, establishing a state mandated fire insurance policy that must be incorporated in every policy in the state that insures against the peril of fire. For example the New York Standard Fire Policy provides as follows: The insured, as often as may be reasonably required, shall exhibit

Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary. The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide. The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http:// shop.americanbar.org/eBus/Store/Pro ductDetails.aspx?productId=214624, or 800-285-2221 which is presently available. Legal Disclaimer: The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.

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[ ON MY RADAR ] to any person designated by this company all that remains of any property herein described and submit to EUO by any person named by this company, and subscribe the same; and as often as may be reasonably required, shall produce for examination and copying all books of account, bills, invoices, and other vouchers… Similarly, the 1991 edition of the Homeowners policy provides, in easy to read language: 2. Your Duties After Loss. In case of a loss to covered property, you must see that the following are done: * * *f. As often as we reasonably require: (1)Show the damaged property. (2) Provide us with records and documents we request and permit us to make copies; and (3) Submit to EUO, while not in the presence of any other “insured” and sign the same. [ISO form HO 00 03 04 91, Page 9 of 10] In Shaw v. State Farm Fire and Cas. Co., 37 So.3d 329, 35 Fla. L. Weekly D1020 (2010), Florida concluded that State Farm had every right to include the EUO provision in its contract as a condition precedent to payment or suit, just as insurance companies have done in Florida for over a century; State Farm had every right to expect and require that the EUO requirement be complied with by any person or organization making a claim or seeking payment so that State Farm can determine whether the claim in Claﬂin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884)] is proper or fraudulent; and State Farm had every right to require and expect that this clause be complied with by assignees of PIP benefits who are no less capable of filing fraudulent claims than insureds. According to the Florida Court of Appeal, the insured and his assignees—the Appellants—do not have the right to take this valuable contract right and investigative tool away from State Farm through the mere expedient of an assignment. Although the EUO is a formal proceeding it is not part of a judicial process.

The EUO is not controlled by the rules of civil procedure. In most states it is considered a condition precedent to recovery under a policy of insurance. The EUO is not limited by any statute relating to civil discovery. Some states have enacted regulations that try to limit insurers taking the EUO and place certain requirements upon the insurer to chill the desire to take an EUO. Depositions and EUOs serve vastly different purposes. First, the obligation to sit for an EUO is contractual rather than arising out of the rules of civil procedure.

Some states have enacted regulations that try to limit insurers taking the EUO and place certain requirements upon the insurer to chill the desire to take an EUO.

Second, an insured’s counsel plays a different role during EUOs than during depositions. Third, EUOs are taken before litigation to augment the insurer’s investigation of the claim while a deposition is not part of the claim investigation process. Fourth, an insured has a duty to volunteer information related to the claim during an EUO in accordance with the policy while he would have no such obligation in a deposition. [Beasley v. GeoVera Specialty Ins. Co., Slip Copy, 2015 WL 2372328, 2015 WL 2372328 (E.D.La., 2015).] An insurer’s right to ask questions at EUO is basically unlimited. As early as 1884, the U.S. Supreme Court explained the purpose of the EUO as follows: The object of the provisions in the policies of insurance, requiring the assured to submit himself to an EUO, to be reduced to writing, was to enable the company to possess itself of all knowledge, and all information as to other sources and means of knowledge, in regard to the facts, material to their rights, to enable them to decide upon their obligations, and to protect them

against false claims. And every interrogatory that was relevant and pertinent in such an examination was material, in the sense that a true answer to it was of the substance of the obligation of the assured. A false answer as to any matter of fact material to the inquiry, would be fraudulent. If it made, with intent to deceive the insurer, would be fraudulent. If it accomplished its result, it would be a fraud effected; if it failed it would be a fraud attempted. And if the matter were material and the statement false, to the knowledge of the party making it, and willfully made, the intention to deceive the insurer would be necessarily implied, for the law presumes every man to intend the natural consequences of his acts. No one can be permitted to say, in respect to his own statements upon a material matter, that he did not expect to be believed; and if they are knowingly false and willfully made, the fact that they are material is proof of an attempted fraud, because their materiality, in the eye of the law, consists in their tendency to influence the conduct of the party who has an interest in them, and to whom they are addressed. [Claﬂin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884)]

Zalma Opinion The EUO is an important tool that, if used responsibly, can help an insured prove his or her loss or allow an insurer to obtain sufficient evidence to prove coverage does not apply or fraud is being attempted.[IA]

Serving New York, New Jersey, Pennsylvania and Connecticut Since 1889 www.insurance-advocate.com INSURANCE ADVOCATE / March 28, 2016 25

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No Fishing on Facebook, Holds Appellate Division Request to search through plaintiff’s online photos denied in absence of factual predicate Forman v Henkin Can a defendant in a personal injury case get access to a plaintiff ’s Facebook photos and private messages so that the defendant can search for evidence that might contradict the plaintiff ’s allegations? No, says the Appellate Division at least, not unless the defendant already found something (e.g. a photo) that lays a foundation for a further search. In an interesting footnote, the Court also says that Facebook posts that are “permanently deleted” might form a basis for a spoliation charge. — LNR uIn this personal injury action, plaintiff alleges that while riding one of defendant’s horses, the stirrup leather attached to the saddle broke, causing her to lose her balance and fall to the ground. Plaintiff claims that defendant was negligent because he failed to properly prepare the horse for riding, and neglected to maintain and inspect the equipment. Plaintiff alleges that the accident resulted in cognitive and physical injuries that have limited her ability to participate in social and recreational activities. At her deposition, plaintiff testified that she maintained and posted to a Facebook account prior to the accident, but deactivated the account at some point after. Defendant sought an order compelling plaintiff to provide an unlimited authorization to obtain records from her Facebook account, including all photographs, status updates and instant messages. Supreme Court, Bronx, granted the motion to the extent of directing plaintiff to produce: (a) all photographs of herself privately posted on Facebook prior to the accident that she intends to introduce at trial; (b) all photographs of herself privately posted on Facebook after the accident that do not show nudity or romantic encounters; and (c) authorizations for Facebook records showing each time plaintiff posted a private message after the accident and the number of characters or words in those messages. 26 March 28, 2016 / INSURANCE ADVOCATE

…we denied the defendants’ request for an authorization for the plaintiff’s Facebook records, concluding that the mere fact that the plaintiff used Facebook was an insufficient basis to provide the defendant with access to the account.

The Appellate Division reversed. CPLR 3101(a) provides that “there shall be full disclosure of all matter material and necessary in the prosecution or defense of an action.” In determining whether the information sought is subject to discovery, “the test is one of usefulness and reason” (Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 [1968]). “It is incumbent on the party seeking disclosure to demonstrate that the method of discovery sought will result in the disclosure of relevant evidence or is reasonably calculated to lead to the discovery of information bearing on the claims” (Vyas v Campbell, 4 AD3d 417, 418 [2d Dept 2004], quoting Crazytown Furniture v Brooklyn Union Gas Co., 150 AD2d 420, 421 [2d Dept 1989]; see also GS Plasticos Limitada v Bureau Veritas Consumer Prods. Servs., Inc., 112 AD3d 539, 540 [1st Dept 2013] [sufficient factual predicate required for discovery demands]; Sexter v Kimmelman, Sexter, Warmﬂash & Leitner, 277 AD2d 186 [1st Dept 2000]). Discovery demands are improper if they are based upon “hypothetical speculations calculated to justify a fishing expedition” (Budano v Gurdon, 97 AD3d 497, 499 [1st Dept 2012], quoting Manley v New York

Lawrence N. ("Larry") Rogak has been practicing insurance law since 1981. He has defended over 23,000 lawsuits and arbitrations and has represented over 75 different insurance companies and self-insured corporations. Lawrence N. Rogak LLC is listed in Best's Recommended Insurance Attorneys, a distinction that requires written recommendations from at least 12 insurance carriers. A 1981 graduate of Brooklyn Law School, Mr. Rogak has published more books and articles on insurance law than any other New York attorney in the field.

City Hous. Auth., 190 AD2d 600, 601 [1st Dept 1993]). This Court has consistently applied these settled principles in the context of discovery requests seeking a party’s social media information. For example, in Tapp v New York State Urban Dev. Corp. (102 AD3d 620 [1st Dept 2013]), we denied the defendants’ request for an authorization for the plaintiff ’s Facebook records, concluding that the mere fact that the plaintiff used Facebook was an insufficient basis to provide the defendant with access to the account. Likewise, in Pecile v Titan Capital Group, LLC (113 AD3d 526 [1st Dept 2014]), we concluded that vague and generalized assertions that information in the plaintiff ’s social media sites might contradict the plaintiff ’s claims of emotional distress were not a proper basis for disclosure (see also Abrams v Pecile (83 AD3d 527 [1st Dept 2011] [rejecting the defendant’s demand for access to the plaintiff ’s social networking sites because there was no showing that information in those accounts would lead to relevant evidence bearing on the plaintiff ’s claims]). Other Departments of the Appellate Division, consistent with well-established case law governing disclosure, have required some threshold showing before allowing access to a party’s private social media information (see e.g. Richards v

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[ COURTSIDE ] Hertz Corp., 100 AD3d 728, 730-731 [2d Dept 2012] [striking demand for Facebook information of one of the plaintiffs because there was no showing that the disclosure of that material would result in disclosure of relevant evidence or would be reasonably calculated to lead to discovery of information bearing on the claim]; McCann v Harleysville Ins. Co. of N.Y., 78 AD3d 1524, 1525 [4th Dept 2010] [denying authorization for the plaintiff ’s Facebook information where the defendant failed to establish a factual predicate of relevancy, and characterizing the request as “a fishing expedition...based on the mere hope of finding relevant evidence”]. Guided by these principles, we conclude that defendant has failed to establish entitlement to either plaintiff ’s private Facebook photographs, or information about the times and length of plaintiff ’s private Facebook messages. The fact that plaintiff had previously used Facebook to post pictures of herself or to send messages is insufficient to warrant discovery of this information (see Tapp, 102 AD3d at 620 [the plaintiff ’s mere utilization of a Facebook account is not enough]). Likewise, defendant’s speculation that the requested information might be relevant to rebut plaintiff ’s claims of injury or disability is not a proper basis for requiring access to plaintiff ’s Facebook account ([the defendants’ argument that the plaintiff ’s Facebook postings might reveal daily activities that contradict claims of disability is “nothing more than a request for permission to conduct a fishing expedition”]; Pecile, 113 AD3d at 527 [vague and generalized assertions that the information sought might conflict with the plaintiff ’s claims of emotional distress insufficient]).[FN1] However, in accordance with standard pretrial procedures, plaintiff must provide defendant with all photographs of herself posted on Facebook, either before or after the accident, that she intends to use at trial. Plaintiff concedes that she cannot use these photographs at trial without having first disclosed them to defendant. We disagree with the dissent’s position that we should reconsider the well-settled body of case law, from both this Court and other Departments, governing the disclosure of social media information. Both parties here agree with the general legal principles set forth in the existing case law and differ only as to the application of those principles to the specific facts of this

case. Neither party asks us to revisit our controlling precedent, and the doctrine of stare decisis requires us to adhere to our prior decisions (see People v Aarons, 305 AD2d 45, 56 [1st Dept 2003] [“stare decisis stands as a check on a court’s temptation to overrule recent precedent. Only compelling circumstances should require us to

…“if a plaintiff claims to be physically unable to engage in activities due to the defendant’s alleged negligence, posted information, including photographs and the various forms of communications (such as status updates and messages) that establish or illustrate the plaintiff’s former or current activities or abilities will be discoverable.” depart from this doctrine”], affd 2 NY3d 547 [2004]). Although we agree with the dissent that social media is constantly evolving, there is no reason to alter the existing legal framework simply because the potential exists that new social network practices may surface. Furthermore, there is no dispute that the features of Facebook at issue here (i.e., the ability to post photographs and send messages) have been around for many years. Contrary to the dissent’s view, this Court’s prior decisions do not stand for the proposition that different discovery rules exist for social media information. The discovery standard we have applied in the social media context is the same as in all other situations — a party must be able to demonstrate that the information sought is likely to result in the disclosure of relevant information bearing on the claims (see e.g. GS Plasticos Limitada, 112 AD3d at 540; Budano, 97 AD3d at 499; Sexter, 277 AD2d at 187; Manley, 190 AD2d at 601). This threshold factual predicate, or “reasoned basis” in the words of the dissent, stands as a check against par-

ties conducting “fishing expeditions” based on mere speculation (see Devore v Pﬁzer Inc., 58 AD3d 138, 144 [1st Dept 2008], lv denied 12 NY3d 703 [2009] [parties cannot use discovery “as a fishing expedition when they cannot set forth a reliable factual basis for what amounts to, at best, mere suspicions”]). Although we agree with the dissent that the discovery standard is the same regardless of whether the information requested is contained in social media accounts or elsewhere, we disagree with the dissent’s analysis as to how that standard should work in the personal injury context. According to the dissent, “if a plaintiff claims to be physically unable to engage in activities due to the defendant’s alleged negligence, posted information, including photographs and the various forms of communications (such as status updates and messages) that establish or illustrate the plaintiff ’s former or current activities or abilities will be discoverable.” This view, however, is contrary to our established precedent holding otherwise (see Pecile v Titan, 113 AD3d at 526; Tapp, 102 AD3d at 620; Abrams, 83 AD3d at 527). We are bound by principles of stare decisis to follow this prior precedent, particularly here where no party asks us to revisit it, and we believe that this precedent results in the correct outcome here. Taken to its logical conclusion, the dissent’s position would allow for discovery of all photographs of a personal injury plaintiff after the accident, whether stored on social media, a cell phone or a camera, or located in a photo album or file cabinet. Likewise, it would require production of all communications about the plaintiff ’s activities that exist not only on social media, but in diaries, letters, text messages and emails. Allowing the unbridled disclosure of such information, based merely on speculation that some relevant information might be found, is the very type of “fishing expedition” that cannot be countenanced. Contrary to the dissent’s view, there is no analogy between the defense litigation tool of surveillance video and the wholesale discovery of private social media information. The surveillance of a personal injury plaintiff in public places is a far cry from trying to uncover a person’s private social media postings in the absence of any factual predicate. CONTINUED ON PAGE 28

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The question of whether a court should conduct an in camera review of social media information is not presented on this appeal. The court below did not order an in camera review, nor do the parties on appeal request any such relief. Further, the dissent is mistaken that our prior decisions in this area require a court to conduct an in camera review in all circumstances where a sufficient factual predicate is established. The decision whether to order an in camera review rests in the sound discretion of the trial court, or in this Court’s discretion if we choose to exercise it (see Gottlieb v Northriver Trading Co. LLC, 106 AD3d 580 [1st Dept 2013]; Horizon Asset Mgt., Inc. v Duffy, 82 AD3d 442, 443 [1st Dept 2011]). The cases cited by the dissent in which an in camera review was directed stand simply for the proposition that those courts, in their discretion, believed that such review was appropriate. Finally, plaintiff ’s claim that the motion court erred in sua sponte ordering a physical and psychological examination of her is based on a misreading of the court’s decision. As defendant acknowledges, the court did not grant such relief, but merely referenced the previously scheduled examination discussed at oral argument. All concur except Saxe, J. who dissents in a memorandum as follows: SAXE , J. (dissenting) This appeal, concerning whether defendant is entitled to disclosure of information that plaintiff posted on the nonpublic portion of her Facebook page before she deactivated her account, prompts me to suggest that we reconsider this Court’s recent decisions on the subject (see e.g. Patterson v Turner Constr. Co., 88 AD3d 617 [1st Dept 2011]; Tapp v New York State Urban Dev. Corp., 102 AD3d 620 [1st Dept 2013]; Spearin v Linmar, L.P., 129 AD3d 528 [1st Dept 2015]). There are two aspects of these previous rulings that are problematic: first, the showing necessary to obtain discovery of relevant information posted on Facebook or other social networking sites, and second, the procedure requiring that once a threshold showing is made, the trial court must conduct an in camera review of the posted contents in each case to ensure that the defendant’s access is lim28 March 28, 2016 / INSURANCE ADVOCATE

ited to relevant information. In view of how recently our initial rulings on the subject were issued, it makes sense to revisit those initial rulings sooner rather than later; in any event, the topic is too new to warrant rigid adherence at this time to our initial rulings under the doctrine of stare decisis.

…a defendant will be permitted to seek discovery of the nonpublic information a plaintiff posted on social media, if, and only if, the defendant can first unearth some item from the plaintiff’s publicly available social media postings that tends to conflict with or contradict the plaintiff’s claims. Facts Plaintiff Kelly Forman alleges that she was injured on June 20, 2011 while visiting defendant Mark Henkin in Westhampton. The two were on what was to be a leisurely horseback ride, when plaintiff fell off of the animal, allegedly due to negligence on the part of Henkin and his employees in failing to correctly tack up the saddle and providing faulty equipment. Plaintiff alleges serious and debilitating injuries, including traumatic brain injury and spinal injuries, causing cognitive deficits, memory loss, inability to concentrate, difficulty in communicating, and social isolation, severely restricting her daily life. Approximately five months later, she commenced this action. In a written statement plaintiff provided to defendant at her deposition, she described the nature of her claimed physical, mental and psychological injuries. Among the assertions she made was that after the accident, her “social network went from huge to nothing.” At her deposition, plaintiff testified that before the accident she had maintained a Facebook page and had posted photographs showing her doing fun things, but that she deactivated her Facebook page some months after the accident (and after the commencement of

this action), sometime between June and August of 2012. She said that due to her current difficulties with memory, she could not recall the exact nature or extent of her Facebook activity from the time of the accident until she deactivated the account. Defendant demanded an authorization to obtain plaintiff ’s Facebook records, unlimited in time and scope. When the issue was raised by motion, defendant argued that the requested material was necessary for his defense, as it was relevant to the issue of plaintiff ’s credibility. Plaintiff opposed the motion, arguing that defendant had not shown that the material requested was reasonably calculated to result in the disclosure of relevant evidence, or was material and necessary to the defense of the claims, but that rather, defendant was only speculating that materials posted in her Facebook account after the accident contained such evidence. The court directed disclosure of any photographs posted after the accident which do not depict nudity or romantic encounters, along with any photographs posted before the accident that plaintiff intends to use at trial, as well as any private Facebook messages plaintiff sent after the accident, redacted so that the only information provided is the amount of characters and the time at which the message was sent. On plaintiff ’s appeal, the majority concludes that the direction for the disclosure of photographs and information about private messages must be vacated, in the absence of a factual predicate that contradicts or conflicts with plaintiff’s claims. We disagree with that approach to the subject, although it comports with our current case law. Discussion A few basic concepts about Facebook must be understood for this discussion (see generally http://www.facebook. com/help [accessed July 21, 2015]). Every person who subscribes to Facebook has a “public page” containing information that the subscriber allows to be viewed by the general public, which may include content such as photographs, status updates, or shared links. Each subscriber may choose to make each piece of posted content publicly available, or may limit the posted content so that it can only be viewed by a more limited group, such as the individuals identified by the subscriber as “friends,” or a customized list of people. Subscribers can also use Facebook to send messages to

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[ COURTSIDE ] other subscribers in a manner similar to text messaging. Those messages will not be visible to anyone not involved in them. If a subscriber opts to deactivate his or her Facebook page, that person’s page is no longer viewable. However, deactivating one’s Facebook page does not erase the information that was previously posted there. Instead that information remains present in Facebook’s internal records, so that it can be restored by reactivation of an account, or obtained through a court order.[FN2] Over the past few years, as social networking sites have become increasingly ubiquitous, courts across the country have adopted a variety of approaches to discovery of social media accounts (see generally Rick E. Kubler and Holly A. Miller, “Recent Developments in Discovery of Social Media Content,” ABA Section of Litigation, Insurance Coverage Litigation Committee CLE Seminar, available at http://www.americanbar.org/content/dam/ aba/administrative/litigation/materials/201 5_inscle_materials/written_materials/24_1 _recent_developements_in_discovery_of_ social_media_content.authcheckdam.pdf [sic] [accessed Sept. 28, 2015]). It is clear that “discovery of social networking information is a developing body of jurisprudence” (Mallory Allen & Aaron Orheim, Get Outta My Face[book]: The Discoverability of Social Networking Data and the Passwords Needed to Access Them, 8 Wash J L Tech & Arts 137, 152 [2012]). The case law that has emerged in this state in the last few years regarding discovery of information posted on personal social networking sites holds that a defendant will be permitted to seek discovery of the nonpublic information a plaintiff posted on social media, if, and only if, the defendant can first unearth some item from the plaintiff ’s publicly available social media postings that tends to conflict with or contradict the plaintiff ’s claims. Even if that hurdle is passed, then the trial court must conduct an in camera review of the materials posted by the plaintiff to ensure that the defendant is provided only with relevant materials. The first New York State appellate case considering a demand for the contents of a plaintiff ’s Facebook account was issued by the Fourth Department in 2010, affirming the denial of the defendant’s motion for such an authorization (McCann v

Harleysville Ins. Co. of New York, 78 AD3d 1524 [4th Dept 2010]). In rejecting the defendant’s assertion that the information was relevant to whether the plaintiff had sustained a serious injury in the accident, the Fourth Department observed that the demand was essentially “a fishing expedi-

Even where some factual predicate for the disclosure of information posted on social media is established, this Court has required that an in camera review be performed so that the defendant is not made privy to non-relevant content. tion” into the plaintiff ’s Facebook account in the hope of finding relevant evidence. It is worth noting that the demand in McCann was for the entire contents of the plaintiff ’s Facebook account; the defendant made no effort to tailor the demand to limit it to relevant, discoverable materials contained there. The Fourth Department elaborated on the point in Kregg v Maldonado (98 AD3d 1289 [4th Dept 2012]). In Kregg, upon learning that family members of the injured party had established Facebook and MySpace accounts for him and had posted material on his behalf in connection with those accounts, the defendants requested the disclosure of the contents of those and any other social media accounts maintained by or on behalf of the injured party. The Court explained that the request was made without “a factual predicate with respect to the relevancy of the evidence” (id. at 1290, quoting McCann at 1525; Crazytown Furniture v Brooklyn Union Gas Co., 150 AD2d 420, 421 [2d Dept 1989]), observing that “there [was] no contention that the information in the social media accounts contradicted plaintiff ’s claims for the diminution of the injured party’s enjoyment of life” (Kregg at 1290). The prerequisite of a “factual predicate” contradicting the plaintiff’s claims, imposed in McCann and Kregg, has been incorporated into the decisions that followed on discovery of material posted on social media.

In Tapp v New York State Urban Dev. Corp. (102 AD3d 620 [1st Dept 2013], supra), this Court concluded that merely having a Facebook account does not establish a factual predicate for discovery of private material posted to a Facebook page. Tapp used the Kregg concept of requiring a “factual predicate” before allowing a defendant to obtain discovery of information the plaintiff posted on social media: “defendants must establish a factual predicate for their request by identifying relevant information in plaintiff ’s Facebook account — that is, information that contradicts or conflicts with plaintiff ’s alleged restrictions, disabilities, and losses, and other claims’” (id. quoting Patterson v Turner Constr. Co., 88 AD3d 617, 618 [1st Dept 2011], supra, Kregg, 98 AD3d at 1290). Indeed, in Tapp, this Court explicitly rejected the defendant’s rationale that “plaintiff ’s Facebook postings may reveal daily activities that contradict or conflict with’ plaintiff ’s claim of disability,” asserting that the argument amounted to a “fishing expedition” (id. at 621, citing McCann at 1525). Even where some factual predicate for the disclosure of information posted on social media is established, this Court has required that an in camera review be performed so that the defendant is not made privy to non-relevant content. This procedure was imposed in Patterson v Turner Constr. and the recent case of Spearin v Linmar, L.P. (129 AD3d 528 [1st Dept 2015], supra). In Patterson, where the defendant requested an authorization for all of the plaintiff ’s Facebook records after the incident, the motion court conducted an in camera review and determined that at least some of the information contained there would “result in the disclosure of relevant evidence” or was “reasonably calculated to lead to the discovery of information bearing on the claims,” and consequently ordered the plaintiff to provide the requested authorization. This Court remanded the matter back to the motion court for a more specific determination, explaining that “it is possible that not all Facebook communications are related to the events that gave rise to plaintiff ’s cause of action” (88 AD2d at 618). In Spearin, the plaintiff ’s public profile picture from his Facebook account, uploaded after his accident, depicted the plaintiff sitting in front of a piano, which CONTINUED ON PAGE 32

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tended to contradict his testimony that, as a result of the claimed accident he could longer play the piano. Even so, this Court modified an order that required the plaintiff to provide an authorization for access to his Facebook account; we required, instead, an in camera review of the plaintiff ’s post-accident Facebook postings for identification of information relevant to the plaintiff ’s alleged injuries. The Second Department ruled similarly in Richards v Hertz Corp., (100 AD3d 728, 730 [2nd Dept 2012]), where the plaintiff claimed she could no longer ski, yet after the accident a picture was uploaded depicting her on skis. This factual predicate was held to entitle the defendant not to an authorization for all of the material posted to Facebook by the plaintiff, but to an in camera review of those items and a determination of which ones were relevant to the claims. The procedure created by these cases, by which a defendant may obtain discovery of nonpublic information posted on a social media source in a plaintiff ’s control only if that defendant has first found an

J U S T

item tending to contradict the plaintiff ’s claims, at which time the trial court must conduct an in camera review of all the items contained in that social media source, imposes a substantial — and

rately perform the review function” (Melissa “G” v North Babylon Union Free Sch. Dist., 48 Misc 3d 389, 393 [Sup Ct, Suffolk County 2015]). Moreover, as the numbers of people who maintain social networking site accounts increase over time, there will be a commensurate increase in the burden on the trial courts handling personal injury litigation to conduct in camera reviews of litigants’ social media postings. Our trial courts are already overburdened; we should think twice about unnecessarily adding to their workload. Moreover, the extra burden is clearly unnecessary since the procedure we are currently employing stands in marked contrast to the standard discovery procedure in civil litigation generally. All discovery issues in this state are controlled by CPLR 3101(a), which provides that “[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action.” The term “material and necessary” has long been interpreted liberally in New York, “to require disclosure, upon request, of any facts bearing on the controversy which will assist preparation for trial” (Allen v

Moreover, the extra burden is clearly unnecessary since the procedure we are currently employing stands in marked contrast to the standard discovery procedure in civil litigation generally.

unnecessary — burden on trial courts. As one Suffolk County justice has observed, “In camera inspection in disclosure matters is the exception rather than the rule, and there is no basis to believe that plaintiff ’s counsel cannot honestly and accu-

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[ COURTSIDE ] Cromwell-Collier Publ. Co., 21 NY2d 403, 406 [1968]; Anonymous v High School for Envtl. Studies, 32 AD3d 353 [1st Dept 2006]). As the Court of Appeals has more recently put it, “New York has long favored open and far-reaching pretrial discovery” (DiMichel v South Buffalo Ry. Co., 80 NY2d 184, 193 [1992], cert denied sub nom Poole v Consolidated Rail Corp., 510 US 816 [1993]). It is true that the law does not allow “fishing expeditions,” that is, the use of a disclosure demand based solely on “hypothetical speculations” (Manley v New York City Hous. Auth., 190 AD2d 600, 601 [1st Dept 1993] [internal quotation marks omitted]), “merely to see what beneficial things might be inadvertently discovered from the other side” (see Patrick M. Connors, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 3101, C3101:8). However, that does not mean that there is a preliminary requirement that the party seeking discovery must be able to prove that the other side has in its possession an item or items answering to the description in the discovery demand. Rather, the “material and necessary” standard only requires a reasoned basis for asserting that the requested category of items “bear[s] on the controversy” (see id.), or a showing that it is likely to produce relevant evidence (Anne M. Payne and Arlene Zalayet, Modern New York Discovery [2d ed 2004] 2015 Supp § 22.55.60 at 245). Of course, the statute creates exceptions for privileged matter, attorney’s work product, and materials prepared in anticipation of litigation (see CPLR 3101[b], [c], [d][2]); but, beyond such statutory protections, “if nothing unusual can be shown to invoke the court’s protective order powers under CPLR 3103(a), as with a showing that the disclosure devices are being used for harassment or delay, the party is entitled to the disclosure” (Connors, Practice Commentaries, at C3101:8). Finally, a demand may not be overbroad; it must seek only materials relevant to the issues raised in the litigation, and if it fails to distinguish between relevant and irrelevant items, a protective order pursuant to CPLR 3103(a) may be issued. In accordance with the foregoing, generally, in a personal injury action, a defendant may serve on a plaintiff a notice to produce tangible documents or other items in the plaintiff ’s possession or control,

describing the type of content that is relevant to the claimed event and injuries. Assuming that the demand is sufficiently tailored to the issues, and unless a claim of privilege is made, normally the plaintiff must then search through those items to locate any items that meet the demand, and provide those items. There is not usually a need for the trial court to sift through the contents of the plaintiff ’s filing cabinets to determine which documents are relevant to the issues raised in the litigation. One federal magistrate judge provided a cogent analysis of why the rule our courts have adopted regarding discovery from social media accounts should be changed, and a traditional approach used instead: “Some courts have held that the private section of a Facebook account is only discoverable if the party seeking the information can make a threshold evidentiary showing that the plaintiff ’s public Facebook profile contains information that undermines the plaintiff ’s claims. This approach can lead to results that are both too broad and too narrow. On the one hand, a plaintiff should not be required to turn over the private section of his or her Facebook profile (which may or may not contain relevant information) merely because the public section undermines the plaintiff ’s claims. On the other hand, a plaintiff should be required to review the private section and produce any relevant information, regardless of what is reflected in the public section. The Federal Rules of Civil Procedure do not require a party to prove the existence of relevant material before requesting it. Furthermore, this approach improperly shields from discovery the information of Facebook users who do not share any information publicly. For all of the foregoing reasons, the Court will conduct a traditional relevance analysis” [emphasis added]. (Giacchetto v Patchogue-Medford Union Free Sch. Dist., 293 FRD 112, 114 n 1 [ED NY 2013] [internal citations omitted]). There is no reason why the traditional discovery process cannot be used equally well where a defendant wants disclosure of information in digital form and under the plaintiff ’s control, posted on a social networking site. The demand, like any valid discovery demand, would have to be limited to reasonably defined categories of CONTINUED ON PAGE 34

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[ COURTSIDE ] CONTINUED FROM PAGE 33

items that are relevant to the issues raised. Upon receipt of an appropriately tailored demand, a plaintiff ’s obligation would be no different than if the demand concerned hard copies of documents in filing cabinets. A search would be conducted through those documents for responsive relevant documents, and, barring legitimate privilege issues, such responsive relevant documents would be turned over; and if they could not be accessed, an authorization for them would be provided. There is no particular difficulty in applying our traditional approach to discovery requests for information posted on social networking sites. If a plaintiff claims to be physically unable to engage in activities due to the defendant’s alleged negligence, posted information, including photographs and the various forms of communications (such as status updates and messages) that establish or illustrate the plaintiff ’s former or current activities or abilities will be discoverable. If a plaintiff ’s claims are for emotional or psychological injury, it may be more difficult to frame a discovery demand, but it can certainly be done without resorting to a blanket demand for everything posted to the account (see e.g. Giacchetto, 293 FRD at 112; Equal Empl. Opportunity Commn. v Simply Storage Mgt., LLC, 270 FRD 430 [SD Ind 2010]). Using the approach I suggest would also obviate the need for the awkward and questionable procedure adopted by the motion court in this matter with regard to posted messages; the order on appeal allowed defendant access to only the number of characters per message and the time each was sent on plaintiff ’s Facebook page, but not the content. If the traditional approach to discovery were applied to posted messages, they could be treated exactly as any other letter, notice or document. Of course, categorizing posted material as “private” does not constitute a legitimate basis for protecting it from discovery. There can be no reasonable expectation of privacy in communications that have reached their intended recipients (see United States v Lifshitz, 369 F3d 173, 190 [2d Cir 2004]; see generally Romano v Steelcase Inc., 30 Misc 3d 426, 432-434 [Sup Ct Suffolk County 2010]). As long as the item is relevant and responsive to an appropriate discovery 34 March 28, 2016 / INSURANCE ADVOCATE

demand, it is discoverable. To the extent disclosure of contents of a social media account could reveal embarrassing information, “that is the inevitable result of alleging these sorts of injuries” (Equal Empl. Opportunity Commn. v Simply Storage, 270 FRD at 437).

An authorization for the site itself to provide posted content would be necessary only if previously posted materials became inaccessible to the subscriber.

Nor should it matter that the account was “deactivated,” since apparently a deactivated account may easily be “reactivated,” thereby giving the subscriber access to the previously posted material (see generally http://www.facebook.com/help [accessed July 21, 2015]). An authorization for the site itself to provide posted content would be necessary only if previously posted materials became inaccessible to the subscriber. The majority suggests that the doctrine of stare decisis precludes us from altering our previous rulings. However, in my view this so-called “well-settled body of case law” is not so long-established that it is deserving of immutable stare decisis treatment. “[T]he relevant factors in deciding whether to adhere to the principle of stare decisis include the antiquity of the precedent, the reliance interests at stake, and of course whether the decision was well reasoned” (Montejo v Louisiana, 556 US 778, 792-793 [2009]). Not only are the precedents under consideration here only a few years old, but they concern social networking practices that are still in the process of developing. Under these circumstances, the relationship of social media and the law ought to be flexible, open to discussion and re-examination, rather than bound by our initial views regarding the optimal procedure to be used. In addition to relying on stare decisis, the majority concludes that there is no need to “alter the existing legal frame-

work.” Little is said about how the existing decisions have unfairly created a rule of judicial protectionism for the digital messages and images created by social networking site users, in contrast to how discovery of tangible documents is treated under the CPLR. In this context — the area where litigation and social media converge — it is important to keep in mind that in recent years social media profiles have become virtual windows into subscribers’ lives. The breadth of information posted by many people on a daily basis creates ongoing portrayals of those individuals’ lives that are sometimes so detailed that they can rival the defense litigation tool referred to as a “day in the life” surveillance video. And, just as “day in the life” videos are a staple of tort practice (see Ken Strutin, The Use of Social Media in Sentencing Advocacy; Technology Today, NYLJ, Sept. 28, 2010 at 5, col. 1), the contents of a selfmade portrait of a plaintiff ’s day-to-day life may contain information appropriate for discovery in personal injury litigation. Facebook and other similar social networking sites are so popular that it will soon be uncommon to find a personal injury plaintiff who does not maintain such an on-line presence. We should keep that in mind when unnecessarily creating new discovery procedures for them, especially when those procedures are unduly burdensome on our trial courts. THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT. ENTERED: DECEMBER 17, 2015 CLERK [IA] 2015 NY Slip Op 09350 Decided on December 17, 2015 Appellate Division, First Department

FN1: The fact that plaintiff deactivated her Facebook account is not a basis to conclude that relevant information is contained therein. In any event, in the motion papers below, defendant’s counsel conceded that he conducted a search of plaintiff ’s public Facebook profile before she deactivated it and found nothing but an old picture of her. FN2: It is also possible for an account to be permanently deleted, an option not relevant to this discussion, but which could, in certain circumstances, lead to a spoliation claim (see Gatto v United Air Lines, Inc., 2013 US Dist LEXIS 41909, 2013 WL 1285285 [D NJ March 25, 2013]).

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